Dual pricing: how to overcome this 'necessary evil'

Phil Whitehouse, head of The Mortgage Alliance (TMA), examines what action brokers can take to make sure they don't lose out in a dual-pricing environment.

Dual pricing is not a new concept, but it is certainly one that raised the ire of the intermediary market post-credit crunch.

Looking back to late 2008 when this practice was arguably at its peak, many lenders alienated intermediaries by maximising their mortgage allocation through targeting consumers directly in their high street branch networks.

Understandably, this upset many who stood up and suggested that this fell foul of Treating Customers Fairly (TCF) principles.

Inevitably, this was a tough time for all concerned in the mortgage market, but especially so for the intermediary channel. Some lenders argued that it was necessary because they had limited money to lend and needed to ensure they were not flooded with applications they could not control.

Other lenders said they needed to keep their branches busy to gain maximum return on their investment.

The alternative view by some in the intermediary market was that lenders used the liquidity crisis as an opportunity to deliberately push brokers out of the door and reap the rewards of any direct business.

In current conditions, while certainly not as bad as in 2008/09, the issue of dual pricing remains a problem as lending conditions remain constrained.

Lenders of all sizes are still feeling the pinch, with many lacking access to sufficient funding to lend at levels the industry has come to expect over previous years.

However, as credit slowly returns, so has the emphasis on the intermediary market, especially by the new entrants, as well as some strong established lenders.

Lending remains nowhere near the levels of old, but thankfully it has stabilised and the CML has revised its 2011 gross lending forecast upwards. If gross lending does reach the predicted £140bn, it will be the first time since the crisis that it hasn't fallen.

In addition, despite some lenders continuing to undertake some form of dual pricing and HSBC ignoring the intermediary market completely, brokers still account for six out of ten deals.

Fight or flight?

The threat of high street lending has not gone away, but it has been blunted somewhat by a combination of improved conditions and the intermediary market's capacity to evolve.

However, one of the biggest things still stopping some intermediaries from curbing the threat is themselves by a) ignoring it completely or b) choosing to battle it head on.

Having said this, many intermediary firms have acknowledged the threat and adapted their offerings accordingly.

Some have embraced the concept of incorporating direct deals into their advice process by introducing a fee-charging structure to help combat this threat, while others have boosted their range of services to offer clients a true holistic advice process.